Stevo Design, Inc. v. SBR Mktg. Ltd.

• Decision Date: 25 January 2013
• Docket Number: No. 2:11–CV–00304–LRH–CWH.,2:11–CV–00304–LRH–CWH.
• Citation: 919 F.Supp.2d 1112
• Parties: STEVO DESIGN, INC., a Florida corporation; Steven Budin, an individual; and Alan Rolli, an individual, Plaintiffs, v. SBR MARKETING LTD., a foreign corporation; and Brian Daniele, an individual, Defendants.
• Court: U.S. District Court — District of Nevada

919 F.Supp.2d 1112

STEVO DESIGN, INC., a Florida corporation; Steven Budin, an individual; and Alan Rolli, an individual, Plaintiffs,

v.SBR MARKETING LTD., a foreign corporation; and Brian Daniele, an individual, Defendants.

No. 2:11–CV–00304–LRH–CWH.

United States District Court,

D. Nevada.

Jan. 25, 2013.

Brian M. Akkashian, Dickinson Wright PLLC, Detroit, MI, Steven A. Gibson, Jonathan M.A. Salls, Jodi Donetta Lowry, Dickinson Wright PLLC, Las Vegas, NV, for Plaintiffs.

Chad A. Bowers, The Law Office Of Chad A. Bowers, Ltd., Jonathan M.A. Salls, Dickinson Wright PLLC, Las Vegas, NV, Colin Arthur Hardacre, Gary Jay Kaufman, The Kaufman Law Group, Los Angeles, CA, for Defendants.

Brian Daniele, Springfield, VA, pro se.

ORDER

LARRY R. HICKS, District Judge.

This is a copyright and trademark dispute, for the most part. Before the court is Stevo Design, Inc., Steven Budin, and Alan Rolli's (“Plaintiffs' ”) motion to alter or amend judgment under Federal Rule of Civil Procedure 59(e) (# 49 ).¹ Defendant SBR Marketing Ltd. (“SBR”) has opposed this motion (# 50), and Plaintiffs have replied (# 51).

I. Facts and Procedural History

Plaintiff Stevo Design, Inc. (“Stevo”) is a Florida corporation with its principal place of business in Florida. Stevo is in the business of selling, on pay-per-view and subscription bases, licenses to access electronically-distributed sports betting reports, including compiled sports handicapping information. Plaintiffs Budin and Rolli are Stevo officers, and neither are Nevada residents.

Defendant SBR is a foreign corporation with its principal place of business in Costa Rica. SBR operates a website, www. sbrforum. com, which publishes sports betting and handicapping information. SBR also operates a message board allowing users to post messages related to sports betting and handicapping and to send messages to other users.² Pro se defendant Brian Daniele, a Virginia resident, is an SBR user.

SBR encourages users to frequent its website through the award of “loyalty points.” For instance, a user receives two loyalty points for logging on to the website, and a user receives four loyalty points for contributing content to the message board. SBR awards more than four loyalty points for well thought-out “original” content. Users can also give each other loyalty points. These loyalty points may be turned in for “credits” at offshore gambling websites, and these credits are redeemable for cash as long as they are gambled with first.

Plaintiff Stevo originally filed its complaint against SBR on February 24, 2011(# 1). Stevo then amended its complaint to add the individual plaintiffs and defendant Daniele, as well as several claims against Daniele (# 7). The first amended complaint asserts sixty-five causes of action against the defendants, including trademark infringement, copyright infringement, and Florida and Nevada state law claims. These claims collectively allege that SBR and its users have published Stevo's protected works on SBR's website without having obtained a license. For example, defendant Daniele is alleged to have purchased sports analysis from Stevo and to have unlawfully posted this analysis on SBR's message board.

On March 13, 2012, this court dismissed Plaintiffs' amended complaint on the basis of subject matter jurisdiction. (Order # 45, p. 4.) Plaintiffs have timely objected to this judgment through a motion to alter or amend under Rule 59(e).

II. Discussion

Plaintiffs allege that the court erred in dismissing their amended complaint. This allegation stands, principally, on two legs. First, Plaintiffs argue that the court erroneously treated the extraterritorial application of the copyright and trademark laws as jurisdictional in nature. Second, Plaintiffs note that the Clerk of Court entered judgment against all defendants, whereas the court's order only dismissed claims against SBR.

Plaintiffs' claims against defendant Daniele should not have been dismissed on the basis of the extraterritorial application of the intellectual property laws. This was manifest error meriting a reconsideration of the judgment under Rule 59(e). On reconsideration, however, Plaintiffs' claims do not warrant a different result. The court properly dismissed Plaintiffs' claims, but for the wrong reasons. Set forth below are the right ones.

A. Rule 59(e)

A motion to alter or amend judgment under Rule 59(e) is “an extraordinary remedy which should be used sparingly.” McDowell v. Calderon, 197 F.3d 1253, 1255 n. 1 (9th Cir.1999) (citation and quotation marks omitted). It is available in four “basic” situations: (1) where the motion is necessary to correct “manifest errors of law or fact upon which the judgment rests;” (2) where the motion is necessary to present newly discovered or previously unavailable evidence; (3) where the motion is necessary to “prevent manifest injustice;” and (4) where the amendment is justified by an intervening change in controlling law. Allstate Insurance Co. v. Herron, 634 F.3d 1101, 1111 (9th Cir.2011). Since Rule 59(e) does not itself provide standards for granting or denying a motion to alter or amend, “the district court enjoys considerable discretion in granting or denying the motion.” Id. (citations and quotation marks omitted). Yet the Rule 59(e) motion may not be used to “relitigate old matters, or to raise arguments or present evidence that could have been raised prior to the entry of judgment.” 11 Charles Alan Wright et al., Federal Practice and Procedure § 2810.1 (2d ed. 1995). Finally, amendment of the judgment will be denied if it would serve no useful purpose. Id.

Plaintiffs' first point of error is the court's treatment of subject matter jurisdiction under the copyright and trademark laws. In the March 13 order, the court observed that “all infringement [by SBR] took place on SBR's website operated entirely from Costa Rica.” (Order # 45 at p. 3:22–23.) The court also noted, incorrectly, that the amended complaint did not identify an SBR user who “lives in the United States and uploaded [ ] handicap reports.” ( Id. at 3:35.) (In fact, Daniele is one such user. See First Amended Complaint (“FAC”) # 7, ¶¶ 639, 641, 661, 663, 683, 685, 703, 705.) The court concluded that “[n]either the Copyright Act [17 U.S.C. § 101 et seq.], nor the Lanham Act [15 U.S.C. § 1051 et seq.] cover infringement of copyrights or service marks that occurred entirely outside the United States,” and dismissed Plaintiffs' claims against SBR for lack of subject matter jurisdiction under 28 U.S.C. § 1331.³ (Order # 45 at pp. 3–4.)

The court's treatment of extraterritoriality as a limit of subject matter jurisdiction rather than as an element of the copyright and trademark claims is not “manifest error” under Rule 59(e). As a court in this Circuit has ruled, “There is currently no clear consensus among the courts regarding whether the issue of the extraterritorial reach of the Copyright Act should be treated as an issue of subject matter jurisdiction, or should instead be treated as an element of a claim.” Shropshire v. Canning, 809 F.Supp.2d 1139, 1143 (N.D.Cal.2011). And Ninth Circuit precedent provides conflicting treatments of extraterritoriality under the Copyright Act. Compare Peter Starr Production Co. v. Twin Continental Films, 783 F.2d 1440, 1442 (9th Cir.1986) (treating extraterritoriality as a matter of subject matter jurisdiction) with Subafilms, Ltd. v. MGM—Pathe Communications Co., 24 F.3d 1088, 1095 (9th Cir.1994) (treating extraterritoriality as an element of the copyright infringement claim). Furthermore, Ninth Circuit courts have explicitly treated the extraterritorialapplication of the Lanham Act as jurisdictional in nature. See5 J. Thomas McCarthy, McCarthy on Trademarks and Unfair Competition § 29:58 (4th ed. 2012) (“The Ninth Circuit has developed an involved and elaborate test of subject matter jurisdiction when infringing acts occur in a foreign nation.”); see also Zenger–Miller, Inc. v. Training Team, GmbH, 757 F.Supp. 1062, 1069–71 (N.D.Cal.1991) (treating an extraterritorial Lanham Act claim as exceeding the court's subject matter jurisdiction). Finally, the relationship of subject matter jurisdiction and the extraterritorial application of the Copyright Act and the Lanham Act was fully argued by the parties. ( See SBR's Motion to Dismiss # 26, pp. 8–9; Plaintiffs' Opposition # 31, pp. 9–13.) Since Rule 59(e) may not be used to “relitigate old matters,” Plaintiffs may not use Rule 59(e) to revisit the proper interpretation of extraterritoriality. See Exxon Shipping Co. v. Baker, 554 U.S. 471, 486 n. 5, 128 S.Ct. 2605, 171 L.Ed.2d 570 (2008) (quoting Wright et al. § 2810.1).

However, entry of judgment in favor of defendant Daniele was manifest error. In its March 13 order, the court granted defendant SBR's motion to dismiss, but SBR's motion did not address the claims against Daniele. Therefore, when the court dismissed Plaintiffs' complaint, it dismissed it as to defendant SBR but not as to defendant Daniele. The entry of judgment in favor of Daniele had no basis and was therefore erroneous. See Executive Software North America, Inc. v. United States District Court for Central District of California, 24 F.3d 1545, 1561 (9th Cir.1994), overruled on other grounds by California Department of Water Resources v. Powerex Corp., 533 F.3d 1087 (9th Cir.2008) (holding that the failure to articulate the basis for declining jurisdiction may be clear error).

B. Motion to Dismiss under Rule 12(b)(6)

In light of this error, Rule 59(e) allows the court to reconsider its judgment. Upon reconsideration, the court concludes that while it had the power to hear Plaintiffs' case, it did not have the power to grant Plaintiffs' relief under Federal Rule of Civil Procedure 12(b)(6).

1. Legal Standard

To survive a motion to dismiss for failure to state a claim, a complaint must satisfy the Federal Rule of Civil Procedure 8(a)(2) notice pleading standard. See Mendiondo v....